HOW MY SUPER IS TAXED GUIDE

Transcription

1 HOW MY SUPER IS TAXED GUIDE Prepared and issued The information in this document forms part of the following Energy Super Product Disclosure Statements (PDSs), each issued by Electricity Supply Industry Superannuation (Qld) Ltd (ABN AFSL ) (the Trustee) as the Trustee for Energy Super (ABN ) (the Fund): This document has been prepared for general information only. It does not take into account your financial objectives, financial situation or needs. Any statements of law or proposals are based on our interpretation of the law or proposals as at the date this document was issued. If you require specific advice, we recommend that you seek qualified professional advice. If there are any inconsistencies between the terms of the Energy Super Trust Deed and this document, the terms of the Trust Deed prevail. Energy Super Member Guide PDS issued Energy Super Corporate Member Guide CS Energy (CS Callide Valley) PDS issued Energy Super Corporate Member Guide CS Energy (excluding Callide Valley) PDS issued Energy Super Corporate Member Guide Energex PDS issued Energy Super Corporate Member Guide Ergon Energy PDS issued Energy Super Corporate Member Guide ERM Power PDS issued Energy Super Corporate Member Guide ESI Financial Services PDS issued Energy Super Corporate Member Guide J & P Richardson PDS issued Energy Super Corporate Member Guide Millmerran Operating Company PDS issued Energy Super Corporate Member Guide NRG Gladstone Operating Services PDS issued Energy Super Corporate Member Guide Powerlink PDS issued Energy Super Corporate Member Guide SPARQ PDS issued Energy Super Corporate Member Guide Stanwell PDS issued Energy Super Corporate Member Guide Energy Queensland PDS issued The information in this document also applies to accumulation accounts of Energy Super Defined Benefit members. The information in this document is up-to-date at the date it is issued. Some of the information in this document can change from time-to-time and may not be up-to-date at the time you receive it. If a change is not materially adverse, we may not update this document. Updated and new information will be published on our website. If you would like more information about Energy Super please contact us. We will provide you the information you reasonably require to make an informed assessment of the management, financial condition and investment performance of Energy Super. If you have any questions about being a member of Energy Super, you can contact us from 8.00am to 6.00pm Monday to Friday (excluding National holidays). See page 7 for our contact details. If you would like a copy of the PDS relevant to you, or this document, please contact Energy Super on ENERGY ( ). This information will be provided at no cost. Ratings provided by SuperRatings Pty Ltd (ABN , AFSL ) and Rainmaker Information Pty Ltd (ABN ). SuperRatings does not issue, sell, guarantee or underwrite this product. Go to for details of its ratings criteria. Ratings are only one factor to be considered when making investment decisions. Refer to energysuper.com.au/ratings for information about the rating and the rating scale. IBR How My Super Is Taxed energysuper.com.au I 1

2 TAX ON CONTRIBUTIONS Because super is a concessionally taxed environment (meaning the tax is generally lower than you would pay for other income or investment earnings) the Federal Government has set limits (caps) on the total value of Contributions that you can make or receive without being charged additional tax. CONCESSIONAL CONTRIBUTIONS Concessional Contributions include the Contributions you and your employer make into super before tax is taken out of your wages. These Contributions are generally subject to a concessional tax rate of 15% that is applied when they go into the Fund, provided that the Fund has been informed of your Tax File Number (TFN). An additional tax, known as Division 293 tax, may reduce the tax concession on certain contributions made by, or for, high income earners. You will generally be liable to pay Division 293 tax if the sum of your Income for surcharge purposes and your Low Tax Contributions is greater than $250,000 in the financial year. This additional Division 293 tax means that you pay 30% contributions tax on your concessional contributions. However if your concessional contributions are what take you over the $250,000 threshold, then you will only pay the additional tax on the part of the contribution that takes you over the threshold. This equates to 15 per cent of your Taxable Contributions above the $250,000 threshold. If you are required to pay tax at this higher rate, the Australian Taxation Office (ATO) will calculate the amount of tax payable and provide you with an assessment after the end of the financial year. You may then choose to pay all or part of the assessed amount from your nonsuperannuation monies, or you may provide a release authority to your super fund, in order to have the monies released. For more information on Division 293 tax, visit the ATO website at ato.gov.au Concessional Contributions are subject to a $25,000 cap for the 2017/18 financial year.* This cap will be indexed to average weekly ordinary time earnings (AWOTE) and rounded down to the nearest $2,500. If you exceed the concessional contributions cap, you may have to pay extra tax. See How will I be notified if I exceed a cap? for more information. * From the 2018/19 financial year you will be able to carry forward unused portions of your cap over rolling five year periods if your Total Superannuation Balance at 30 June of the previous financial year is less than $500,000. You ll be able to start making these catch up contributions from 1 July NON-CONCESSIONAL CONTRIBUTIONS Non-Concessional Contributions include any personal after-tax contributions made into super and Spouse contributions received. These Contributions are not taxed going into the Fund. transfer balance cap ($1.6 million for the 2017/18 financial year) your non-concessional contributions cap is nil, and any non-concessional contributions you make will be classed as excess contributions. If you are under age 65 at any time during the financial year you can bring forward up to two years of contributions, providing your Total Superannuation Balance at 30 June of the previous year is less than $1.4 million. If your balance is between $1.4 million and $1.5 million you can only bring forward one additional year of contributions, and if your balance is between $1.5 million and $1.6 million you cannot bring forward any contributions. If you triggered the bring forward rule in the 2015/16 or 2016/17 financial year, transitional caps apply. Please see the Growing My Super Guide, available at energysuper.com.au, for more information. Where the bring forward rule is used, total Non-Concessional Contributions made in the three year period (starting on 1 July of the first financial year in which Non-Concessional Contributions exceeded the cap) cannot exceed the bring forward cap for the year in which the bring forward is triggered. This means the bring forward cap available for the three year period is not indexed if the non-concessional contributions cap is indexed in that period. If your Non-Concessional Contributions exceed the cap, you may have to pay extra tax. See How will I be notified if I exceed a cap? for more information. CONTRIBUTION TAX RATES The tax rates that will apply to Contributions in 2017/18 are summarised in the table below: Concessional contributions Non-concessional contributions Contributions within cap 15% plus, if liable for Division 293 tax, 15% of your Taxable Contributions above the $250,000 threshold. 1 0% 47% Contributions in excess of cap Marginal tax rate plus an interest charge 2 1 Assumes you have provided your TFN. 2 See the If you exceed the concessional contributions cap section for more information. It is your responsibility to monitor your contributions caps. If you have had more than one super fund in the year, keep in mind that Contributions made to all your funds are added together and count towards the relevant cap to work out any extra tax. Energy Super may be not able to warn you about a potential breach of the cap, therefore you should regularly check your contribution totals throughout the year. You can check your contribution levels at any time by contacting us on ENERGY ( ) or by logging onto Member Online. The non-concessional contributions cap, which is four times the concessional contributions cap, is $100,000 for the 2017/18 financial year. If your Total Superannuation Balance at end of 30 June of the previous financial year is equal to or more than the general 2 I energysuper.com.au How My Super Is Taxed IBR

3 SOME TIPS FOR MANAGING YOUR CONCESSIONAL CONTRIBUTIONS CAP INCLUDE: If you choose to salary sacrifice a percentage of your salary (rather than a dollar amount per pay period) to super, then any salary increases that you receive during the year will most likely increase your Concessional Contributions as well. You should be aware if you are close to the cap. Any Contributions paid by your employer to cover insurance premiums also count toward your concessional contributions cap. Sometimes under special conditions, employers agree to increase a superannuation benefit. Such increases may count towards your concessional contributions cap and would add to any other Concessional Contributions you have already made. HOW WILL I BE NOTIFIED IF I EXCEED A CAP? Super funds report all Contributions made on your behalf to the ATO and the ATO determines when a cap has been breached. If you exceed the contributions caps, the ATO will assess the amount of tax that will apply. The ATO will then issue you with an assessment. If you are dissatisfied with the ATO s assessment, you may lodge an objection to it or, in special circumstances apply to have Contributions disregarded or reallocated to another financial year. IF YOU EXCEED THE CONCESSIONAL CONTRIBUTIONS CAP If you exceed the concessional contributions cap, the ATO will assess the amount that you have exceeded the cap by and issue you with an assessment notice, excess concessional contributions determination and fact sheet, and excess concessional contributions election form. Any excess Concessional Contributions will be included in your assessable income for the corresponding year in which you exceeded the cap and taxed at your marginal tax rate. The ATO will issue you an amended assessment notice, if required, if you have already lodged your tax return for that year. In addition, you will be liable for the excess concessional contributions charge. The excess concessional contributions charge is applied to recognise that the tax on excess Concessional Contributions is collected later than normal income tax. The charge is payable on the increase in your tax liability for the year you have excess Concessional Contributions and is applied at a uniform rate that is the same as the shortfall interest charge (SIC). If you don t pay the excess concessional (before-tax) contributions charge by the due date General Interest Charge may also apply. To reduce your tax liability, the tax office will apply a 15% tax offset to account for the contributions tax that has already been paid by your super fund provider. You may elect to withdraw up to 85% of your excess Concessional Contributions from your superannuation fund to help pay your income tax assessment when you have excess Concessional Contributions. Any excess Concessional Contributions withdrawn from your fund will also no longer count towards your non-concessional contributions cap. IF YOU EXCEED THE NON-CONCESSIONAL CONTRIBUTIONS CAP If you exceed the non-concessional contributions cap, the ATO will issue you with an excess contributions tax assessment notice, excess non-concessional contributions determination and fact sheet, and excess non-concessional contributions election form. To avoid paying excess non-concessional contributions tax, you have the option of releasing the excess non-concessional contributions and 85% of an associated earnings amount (as calculated by the ATO) from your superannuation account/s. If you choose to do so, you will be required to complete the election form and send it back to the ATO. The ATO will then send a release authority to us, and we will then pay the amount to you. The ATO will amend your income tax assessment by including the full amount of the associated earnings as assessable income and provide a non-refundable tax offset equal to 15% of the associated earnings. The ATO will then send you notice that the assessment has been amended, and you may be required to pay an amount to them. You will have to pay excess non-concessional contributions tax if you choose not to release your excess non-concessional contributions. The excess amount will be taxed at the highest marginal tax rate of 47% (including Medicare levy). CLAIMING A TAX DEDUCTION FOR SUPERANNUATION CONTRIBUTIONS You can generally claim a tax deduction for personal after-tax contributions you make. However, if you have a Defined Benefits account you will not be able to claim a tax deduction on your compulsory member contributions made from after-tax salary. These contributions will count towards your concessional contributions cap, so you should consider what other concessional contributions are being made to your super so you don t exceed the cap. If you are eligible to make personal contributions and you intend to claim some or all of your Contributions as a tax deduction, you are required to notify us using a Tax Deduction for Personal Super Contributions Form, which can be downloaded from our website at energysuper.com.au Once you have submitted a valid completed notice, the applicable contributions tax will be deducted from your account and we will s end you an acknowledgement of your notice. Please note: All personal contributions you make will be processed initially as Non-Concessional Contributions and will count towards your non-concessional contributions cap until you submit a valid Tax Deduction for Personal Super Contributions Form. To claim a tax deduction, you must submit a deduction notice either when you make the Contribution or before any of the following: you lodge your income tax return for the year in which the Contribution was made; or the end of the financial year following that in which the Contribution was made; or you apply to split the Contributions with your Spouse, and we accept your application; or you commence an income stream based in whole or part on the Contribution ; or you cease to be a member of the Fund. Please note: You are unable to submit a deduction notice after any of the events above have occurred if all or part of the Contribution has been covered by an earlier notice, or if Energy Super no longer holds the Contribution (e.g. you have withdrawn or rolled over the Contribution to another fund). You may vary an earlier notice in certain circumstances, but only to reduce the amount you intend to claim as a tax deduction (including to nil). In order to vary an earlier notice, you must also notify us by submitting a newly completed Tax Deduction for Personal Super Contributions Form. IBR How My Super Is Taxed energysuper.com.au I 3

4 To vary a tax deduction: you must have lodged your income tax return for the year in which your Contributions were made, prior to the end of the following income year, and lodge your variation notice before the end of the day on which the return was lodged; or you must have not yet lodged your income tax return for the relevant year and lodge the variation notice on or before 30 June in the financial year following the year in which your personal contributions were made; or the ATO has disallowed your claim for a deduction for the relevant year and the variation notice reduces the amount stated in your previous valid notice by the amount that has been disallowed. We will not be able to accept a variation to an earlier notice if the Fund no longer holds your Contributions. When deciding whether to claim a deduction you should consider the impact this might have on whether you will exceed your contribution caps or if it will affect your Government Co-contribution eligibility. We recommend you seek taxation and financial advice before making a decision. For more information on claiming a tax deduction for your Contributions visit ato.gov.au TAX OFFSETS FOR SPOUSE CONTRIBUTIONS TAX ON INVESTMENT EARNINGS In order to encourage Australians to invest more for retirement through super, the Government provides tax concessions on the investment returns earned by super funds. This means that super funds may pay less tax than non-super investors on the same investment. Investment earnings (for example dividends, interest, or rent) outside of superannuation will generally attract tax at your marginal tax rate, which can be up to 47% for 2017/18 (including Medicare levy) depending on your taxable income. The taxation rate for super fund investment earnings is capped at 15%, and the effective rate applied may sometimes be lower due to franking credits etc. This tax concession is included in the investment returns calculated and applied to your account as Crediting Rates. Super members do not pay tax directly on the investment returns they receive in the Fund, and these do not need to be declared on your tax return. TAX ON WITHDRAWALS If your spouse (married or de facto) is earning a low income or not working and you make a super contribution on their behalf, you may be able to claim a tax offset. The maximum tax offset is $540 but reduces depending on the amount of the spouse contribution and your Spouse s income. You may be entitled to a tax offset in respect of the 2017/18 financial year if: you did not claim a tax deduction for the Contributions ; both you and your Spouse were Australian residents when the Contributions were made; at the time of making the Contributions you and your Spouse were not living separately and apart on a permanent basis; the sum of your Spouse s assessable income, total reportable fringe benefits amounts and reportable employer super contributions (RESC) for the financial year, was less than $40,000; and the Contribution was made to a super fund which was a complying fund in the income year in which you made the Contribution. Your Spouse must also not have exceeded their nonconcessional contributions cap for the relevant year or had a Total Superannuation Balance equal to or exceeding the general transfer balance cap ($1.6 million in 2017/18) immediately before the start of the financial year in which the contribution was made. The tax offset is calculated as 18% of the lesser of: $3,000 less the amount by which the sum of your Spouse s assessable income, total reportable fringe benefits amounts and RESC exceeds $37,000; and the total of your contributions for your Spouse for the year. For more information visit ato.gov.au Benefits paid from a taxed superannuation fund such as Energy Super are tax-free when paid to members aged 60 and over. Generally, any payment from superannuation to a member aged under 60 will be split into two s tax-free and taxable. TAX ON LUMP SUM WITHDRAWALS The maximum tax rates that will apply to lump sum withdrawals in 2017/18 are shown in the table below: Age or circumstance of payment Taxable Tax-free Under preservation age 20% # Preservation age to age 59 up to the low rate cap.* Amounts above the low rate cap* will be taxed at 15% # Age 60 and over Total benefit under $200 (any age) Terminal illness benefit (any age) Departed temporary residents not a working holiday maker (DASP payment) (any age) Departed working holiday makers who hold a subclass 417 or 462 visa (DASP payment) (any age) 35% taxed element 47% untaxed element 65% * The low rate cap is $200,000 for 2017/18. If you have previously received benefits that have been applied to the low rate cap, the amount of the cap available to you will be reduced by those amounts. # Plus Medicare levy. 4 I energysuper.com.au How My Super Is Taxed IBR

5 TAX ON DEATH BENEFITS The tax payable, if any, on your benefits in the event of your death, depends on who receives the Death benefit and in what form it is paid (lump sum or income stream). Where a member has died before 1 July 2017 and a death benefit is paid as a lump sum to their Spouse, former Spouse or Child (or to the member s estate for their benefit) before 30 June 2019, an anti-detriment benefit may be paid as part of the death benefit. This payment is compensation for tax paid on relevant contributions and investment earnings while the benefit was accumulating. Super funds are no longer able to pay anti-detriment benefits where the member dies on or after 1 July Lump sum benefits paid to dependants (as defined under tax law) on the death of a member are currently tax-free. However, anyone who is not a dependant for tax purposes, may be required to pay some tax on the amount they receive. Definition of dependants (for tax purposes only) For the purposes of determining the tax payable on your benefit, your dependants are: your Children under the age of 18; your Spouse or former Spouse ; any person with whom you had an interdependency relationship; and any person who was financially dependent on you at the time of your death. The main requirements to establish an interdependency relationship are: to live together to have a close personal relationship; and for one or both people to provide financial and domestic support and personal care to the other. Interdependency can also apply where a close personal relationship exists but the other requirements for interdependency are not satisfied because either or both people suffer from a physical, intellectual or psychiatric disability. The maximum tax rates that will apply to Death benefits in 2017/18 are shown in the following tables: Lump sum Death benefit Situation Taxable Tax-free Beneficiary is a tax dependant Beneficiary is not a tax dependant Taxed element**:15% # Untaxed element**:30% # ** Where insurance proceeds are included in the Death benefit the Taxable may be split into Taxed and Untaxed elements. # Plus Medicare levy. Medicare levy is not payable where the benefit is paid to the deceased s Estate. TAX ON DEPARTING AUSTRALIA SUPERANNUATION PAYMENTS (DASPS) The withholding tax rates that apply to DASPs for the 2017/18 financial year are as follows: 0% for the tax-free ; for non-working Holiday maker payments 35% for a taxed element of a taxable and 47% for an untaxed element of a taxable ; and for a Working Holiday Maker payment 65% applied to both the taxed and untaxed element of the taxable. Please note: If, prior to 1 April 2009, you satisfied a condition of release under previous rules, it may be possible for you to claim your super benefit under those rules. If you think this may apply to you please don t hesitate to give us a call. If you are a temporary resident and you would like more information about cashing your super when you permanently leave Australia, call us on ENERGY ( ), log onto ato.gov.au/ departaustralia or read the Getting My Super Guide available on our website at energysuper.com.au TAX ON INCOME PROTECTION PAYMENTS Income Protection payments will generally be taxed at your marginal tax rate. If you lodge an Income Protection claim, we will ask that you complete a Tax File Number Declaration Form (available from the ATO or from Energy Super). If you do not complete a Tax File Number Declaration Form, the Insurer is required by law to withhold tax at the highest marginal tax rate. At the end of the financial year, you will be sent a payment summary so you can include details in your tax return. PROVIDING YOUR TAX FILE NUMBER Energy Super is authorised to collect your TFN by tax laws, the Superannuation Industry (Supervision) Act 1993 and the Privacy Act By providing your TFN to Energy Super, you will allow the Energy Super Trustee to use your TFN for any lawful purposes. This may include: Income Stream Death benefit Situation Either the deceased or the Beneficiary is aged 60 or over Both the deceased and Beneficiary are aged under 60 # Plus Medicare levy. Taxable Marginal tax rates # with a 15% tax offset Tax-free calculating tax on any benefit to which you may be entitled; provision to the ATO for taxation and contribution limit purposes; provision to the ATO so they can determine whether you are eligible for a co-contribution payment; finding and amalgamating your superannuation benefits; provision to the ATO when you receive a benefit, or if your benefit is transferred to the ATO; provision to another superannuation provider receiving IBR How My Super Is Taxed energysuper.com.au I 5

6 benefits you may transfer (we won t pass your TFN to any other superannuation provider if you tell us in writing that you don t want us to pass it on). You are not required to provide your TFN and declining to quote your TFN is not an offence. However, if you choose not to provide your TFN to Energy Super: we will not be able to accept any non-concessional contributions (including spouse contributions) on your behalf; your taxable Contributions received by us may be subject to additional tax of 32% (this is in addition to the 15% tax currently applicable to concessional superannuation contributions); you may pay more tax on your superannuation benefit than is necessary (you may be eligible to get this back at the end of the financial year in your income tax assessment); it may be more difficult to find your superannuation benefit if you change address without notifying Energy Super. The lawful purposes for which your TFN can be used and the consequences of not quoting your TFN may change in the future as a result of legislative change. More information on Tax File Numbers for superannuation purposes can be obtained from the Australian Prudential Regulation Authority (APRA) on or the ATO on We will advise you in the Welcome Letter we send you when you join and again in your Annual Statement if we do not have your TFN. You can also check if we have your TFN at any time by logging onto Member Online. Concessional Contributions: Concessional or before-tax contributions are those made before tax is paid. These contributions include your employer s contributions (such as salary sacrifice) and personal contributions for which a tax deduction is claimed. Crediting Rate: The rate of earnings of an investment option declared for allocation to member accounts. The rate is determined taking into account the net earnings of the investment option (after income tax and fees), and further deductions for administration fees and other expenses of the Fund. Because of these further deductions, the crediting rate for an investment option may be different from the actual net earning rate of that option. A crediting rate for an investment option may be positive or negative. Income for surcharge purposes: To calculate your income for Division 293 tax purposes, the ATO will look at your income tax return and use taxable income (assessable income less deductions), total reportable fringe benefits amounts, net financial investment loss, net rental property loss, amounts on which family trust distribution tax has been paid and super lump sum taxed elements with a zero tax rate. These elements are summed (except the super lump sum amount, which is subtracted) to give the Income for surcharge purposes amount. Low Tax Contributions: Low Tax Contributions are generally concessional contributions made in a financial year to your super fund but exclude any excess concessional contributions. Non-Concessional Contributions: Non-concessional or after tax contributions are those made after tax is paid. This is most commonly from your after-tax pay, but it may be made from any money realised from an investment or income on which tax has already been paid. Spouse: A person who is married to a member, or (whether of the same sex or a different sex) with whom the member is in a relationship that is registered under a law of a state or territory [e.g. the Civil Partnerships Act 2011 (QLD)], or who, although not legally married to the member, lives with the member on a genuine domestic basis in a relationship as a couple. Taxable Contributions: The amount of your Taxable Contributions for a financial year is the lesser of: For more information about tax and super, visit the ATO website at ato.gov.au DEFINITIONS Beneficiary: A person for whom benefits are being held in a fund, including members and their dependants. Child(ren): In addition to any natural child of the member, a child can be: an adopted child (adopted by the member under State legislation); or a step-child (this means a child whose natural parent is alive and married to the member at the time of the member s death); or a child of the member s Spouse ; or a child born by artificial procedures during a relationship with the member. Contribution: A contribution is a payment made to your superannuation fund. Your employer is generally required to make contributions to your super fund. You can also make contributions to your super fund, usually from both before-tax and/or after-tax pay. your Low Tax Contributions ; and any excess of the sum of your Income and your Low Tax Contributions above $250,000. However, Taxable Contributions will be nil if your Low Tax Contributions is nil. Total Superannuation Balance: Total superannuation balance is generally calculated as the sum of an individual s: accumulation phase value: For accumulation benefits this is your accumulation account balance plus the balance of any Transition to Retirement pension. For defined benefits this is generally your withdrawal benefit (ie, the amount you would receive if you terminated employment); and retirement phase value: This is generally the balance in your pension account, other than a Transition to Retirement pension account, as at 30 June the previous year (with transitional rules for 30 June 2017) less any personal injury or structured settlement contributions that have been paid into superannuation. The calculations can be complex, particularly if you have benefits in more than one superannuation fund. More information is available at ato.gov.au/superchanges 6 I energysuper.com.au How My Super Is Taxed IBR

7 HOW TO CONTACT ENERGY SUPER The staff at Energy Super are available to help you with your enquiries between the hours of 8:00am and 6:00pm Monday to Friday. Phone ENERGY ( ) In person Level Creek Street Brisbane Qld info@energysuper.com.au Fax (07) Mail Energy Super PO Box Brisbane Adelaide Street QLD 4000 Website energysuper.com.au EXS0027 IBR How My Super Is Taxed energysuper.com.au I 7